Council of Institutional Investors

SEC Stalls Efforts on Internal Pay Ratio Rules
Thursday, December 11, 2014
by: Rosemary Lally

Section: CII Governance Alert

In a recently published rulemaking agenda, the SEC delayed its final action date for issuing rules on the Dodd-Frank Act’s internal pay ratio disclosure requirement. Originally, the SEC said it intended to issue final rules no later than October 2014, but has now rolled that date back to October 2015.

The rules would require companies to disclose in their SEC filings the median of annual total compensation of all employees other than the CEO, the annual total compensation of the CEO and the ratio of these two amounts.

Brandon Rees, deputy director of the office of investment at the AFL-CIO, which lobbied hard for this disclosure, expressed disappointment. “Many investors would like to be able to consider CEO-to-median-employee pay ratios when voting on say-on-pay votes,” he noted. “It has been over four years since Dodd-Frank was enacted, and the SEC’s proposed rulemaking was issued over one year ago. In contrast, India’s Ministry of Corporate Affairs issued final regulations implementing pay ratio disclosure just seven months after India’s 2013 Companies Act mandated disclosure,” Rees added.

In addition to the pay ratio disclosure, final action dates were extended from October 2014 to October 2015 for Dodd-Frank provisions on clawbacks, pay-for-performance disclosure and director and employee hedging disclosure.
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